Thursday, January 22, 2015

Ascott REIT

Ascott REIT: (S$1.275) 4Q14 within expectations; Commendable 2014 Ascott REIT (ART) 4Q14 DPU surged 62% y/y to 2.16¢, while distributable income jumped 26% to $33.1m, buoyed mainly by one-off items and a right-issue adjustment in 2013. Otherwise, DPU improved 13.4% to 1.76¢. Meanwhile, revenue and gross profit rose 13% and 10%, respectively, boosted by additional contribution from nine properties acquired in 2014, as well as stronger performance from UK properties. For the year, ART paid out a DPU of 7.61¢ (+6%), adjusted for rights issue and excluding one-off items, on distributable income of $33.1m (+9%). Revenue and gross profit edged 13% and 12% to $357.2m and $180.2m, respectively. In 2014, ART’s expansion was commendable. The reit boosted its portfolio by 13.7% to the current $4.1b in value, located across 37 cities in 13 countries. The nine additional properties acquired were across Australia, China, Japan and Malaysia, of which five cities within which were maiden forays. The expansion helped offset the dismal performance from serviced residences in Singapore and Vietnam, which dragged overall RevPAU down 4% to $124/day, as well as lower average daily rate from the China properties acquired in Aug 14. ART lowered its leverage from 40.0% to 38.5% q/q, as debt tenor increased from 3.8 to 4.4 years, with an average borrowing rate of 3%. The reit maintains its focus to deepen its presence in key hospitality markets in Asia Pac and Europe, but remains watchful on a challenging operating environment in 2015, as geopolitical risks and disappointing economic prospects remain a concern. ART is valued at 0.93x P/B, below hospitality peers’average of 0.95x. Bloomberg consensus has 7 Buys, 4 Holds and 1 Sell on ART, with an average 12-month TP of $1.35. The street expects the hospitality reit to yield 6.2% in FY15.

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